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Exhibit 10.3
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY STATE SECURITIES LAW. SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT OR THE
ISSUER HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT SECURED BY SUCH SECURITIES.
eDiets.com, Inc
.
Warrant for the Purchase
of Shares of
Common
Stock
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| 500,000
Shares |
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May 30, 2008 |
FOR VALUE RECEIVED,
eDiets.com, Inc., a Delaware corporation (the
“Company”), hereby certifies that Prides Capital Fund
I, L.P. or its assigns, is entitled to purchase from the Company,
at any time or from time to time commencing on the date hereof (the
“Initial Exercise Date”) and expiring at 5:00 P.M., New
York City time, on the ten (10) year anniversary of the
Original Issue Date (the “Expiration Date”) FIVE
HUNDRED THOUSAND (500,000) fully paid and non-assessable
shares of Common Stock, par value $.001 per share, of the Company
(the “Warrant Shares”) for a per share exercise price
of $4.25 (the “Per Share Warrant Price”). The Per Share
Warrant Price is subject to adjustment as hereinafter provided.
Capitalized terms used and not otherwise defined in this Warrant
shall have the meanings specified in Section 8, unless the
context otherwise requires.
1. Exercise of Warrant
.
(a) This Warrant may be
exercised, in whole at any time or in part from time to time,
commencing on the Initial Exercise Date and expiring at 5:00 P.M.,
New York City time, on the Expiration Date (with the Exercise
Notice at the end of this Warrant duly executed) at the address set
forth in Section 10 hereof, together with payment of the Per
Share Warrant Price multiplied by the number of Warrant Shares to
which such exercise relates made by delivery to the Company of one
or more types of Permitted Consideration.
(b) If this Warrant is
exercised in part, the Company will deliver to the Holder within
three Trading Days of the date such Holder delivers to the Company
this Warrant and an Exercise Notice, together with the payment of
the aggregate Per Share Warrant Price for such exercise, a new
Warrant covering the Warrant Shares that have not been exercised.
By the expiration of the third
Trading Day following the Holder’s
delivery of a Warrant, together with an Exercise Notice and the
payment of the aggregate Per Share Warrant Price for such exercise,
the Company will (i) issue a certificate or certificates in
the name of the Holder for the largest number of whole shares of
the Common Stock to which the Holder shall be entitled and, if this
Warrant is exercised in whole, in lieu of any fractional share of
the Common Stock to which the Holder shall be entitled, pay to the
Holder cash in an amount equal to the fair value of such fractional
share (determined by reference to the closing sales price of the
Common Stock on the date of the Exercise Notice), and
(ii) deliver the other securities and properties receivable
upon the exercise of this Warrant, or the proportionate part
thereof if this Warrant is exercised in part, pursuant to the
provisions of this Warrant.
(c) If, by the third Trading
Day after the date that the Holder delivers an Exercise Notice,
together with the payment of the aggregate Per Share Warrant Price
for such exercise, the Company fails to deliver the required number
of Warrant Shares in the manner required pursuant to
Section 1(b), then the Holder will have the right to rescind
such exercise.
(d) If, by the third Trading
Day after the date that the Holder delivers an Exercise Notice,
together with the payment of the aggregate Per Share Warrant Price
for such exercise, the Company fails to deliver the required number
of Warrant Shares in the manner required pursuant to
Section 1(b), and if after such third Trading Day and prior to
the receipt of such Warrant Shares, the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”), then the Company shall (1) pay in cash
to the Holder the amount by which (x) the Holder’s total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (A) the number of Warrant Shares that
the Company was required to deliver to the Holder in connection
with the exercise at issue by (B) the closing bid price of the
Common Stock at the time of the obligation giving rise to such
purchase obligation and (2) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its
exercise and delivery obligations hereunder. The Holder shall
provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In.
(e) If, after the Required
Effective Date (as defined in the Registration Rights Agreement)
the Warrant Shares to be issued are not registered and available
for resale by the Holder pursuant to a registration statement in
accordance with the Registration Rights Agreement, then
notwithstanding anything contained herein to the contrary, the
Holder may, at its election exercised in its sole discretion,
exercise a portion of this Warrant with respect to an aggregate
total of twenty-five percent (25%) of the total Warrant Shares
and, in lieu of making a cash payment of Permitted Consideration,
elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the
following formula:
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Net Number =
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(A x B) – (A x C
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B
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For purposes of the foregoing
formula:
A=the total number of Warrant
Shares with respect to which this Warrant is then being
exercised.
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B=the average of the closing
sales prices for the five Trading Days immediately prior to (but
not including) the day that the Holder delivers the Exercise Notice
at issue.
C=the Per Share Warrant
Price.
2. Company’s Option
to Change Expiration Date .
Notwithstanding anything
herein to the contrary, in the event that (i) the closing
sales price per share of Common Stock is in excess of 150% of the
Per Share Warrant Price (as may be adjusted pursuant to
Section 3) for thirty (30) consecutive Trading Days,
(ii) the Warrant Shares are either registered for resale
pursuant to an effective registration statement naming the Holder
as a selling stockholder thereunder (and the prospectus thereunder
is available for use by the Holder as to all then available Warrant
Shares) or freely transferable without volume restrictions pursuant
to Rule 144(k) promulgated under the Securities Act, as determined
by counsel to the Company pursuant to a written opinion letter
addressed and in form and substance reasonably acceptable to the
Holder and the transfer agent for the Common Stock, during the
entire sixty (60) Trading Day period referenced in
(i) above through the expiration of the Call Date as set forth
in the Company’s notice pursuant to this Section (the
“Call Condition Period”), and (iii) the Company
shall have complied in all material respects with its obligations
under this Warrant and the Common Stock shall at all times be
listed on the AMEX, New York Stock Exchange, the Nasdaq National
Market, the Nasdaq Capital Market or the OTC Bulletin Board, then,
subject to the conditions set forth in this Section, the Company
may, in its sole discretion, elect to change the Expiration Date
for the respective Warrant to 5:00 P.M., New York City time on the
date that is thirty (30) days after written notice thereof (a
“Call Notice”) is received by the Holder (the
“Call Date”) at the address last shown on the records
of the Company for the Holder or given by the Holder to the Company
for the purpose of notice; provided, that the conditions to giving
such notice must be in effect at all times during the Call
Condition Period or any such notice shall be null and void.
Notwithstanding anything herein to the contrary, if the Company
changes the Expiration Date pursuant to this Section 2, the
Holder may, at its election exercised in its sole discretion,
exercise a portion of this Warrant with respect to an aggregate
total (including any exercises made under Section 1(e)) of
twenty-five percent (25%) of the total Warrant Shares and, in
lieu of making a cash payment of Permitted Consideration, elect
instead to receive upon such exercise the “Net Number”
of shares of Common Stock determined according to the formula set
forth in Section 1(e).
3. Certain Adjustments
. The Per Share Warrant Price and number of Warrant Shares issuable
upon exercise of this Warrant are subject to adjustment from time
to time as set forth in this Section 3.
(a) If the Company, at any
time while this Warrant is outstanding, (i) pays a stock
dividend on its Common Stock or otherwise makes a distribution on
any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding
shares of Common Stock into a smaller
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number of shares, then in each such case
the Per Share Warrant Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination
of shareholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of
this paragraph shall become effective immediately after the
effective date of such subdivision or combination.
(b) If, at any time while
this Warrant is outstanding, (1) the Company effects any
merger or consolidation of the Company with or into another person,
(2) the Company effects any sale of all or substantially all
of its assets in one or a series of related transactions,
(3) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (4) the Company effects any
reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then
thereafter this Warrant shall represent the right to receive, upon
exercise of this Warrant, the same amount and kind of securities,
cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of
the number of Warrant Shares then issuable upon exercise in full of
this Warrant (the “Alternate Consideration”). For
purposes of any such exercise, the determination of the Per Share
Warrant Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one share of Common Stock in
such Fundamental Transaction, and the Company shall apportion the
Per Share Warrant Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction. At the Holder’s option and request,
any successor to the Company or surviving entity (and, if an entity
different from the successor or surviving entity, the entity whose
capital stock or assets the Holders of Common Stock are entitled to
receive as a result of such Fundamental Transaction) in such
Fundamental Transaction shall, either (1) issue to the Holder
a new warrant substantially in the form of this Warrant and
consistent with the foregoing provisions and evidencing the
Holder’s right to purchase the Al
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